Peter L. Berger's Blog, page 606

Fighting the Future

The National Labor Relations Board voted 3-2 yesterday to dramatically expand the bargaining rights of millions of workers at temp agencies, subcontractors, and franchises. While some of these employees could previously only negotiate with their immediate employer—i.e., the local McDonald’s franchise—more will now be able to negotiate with the parent company—i.e., McDonalds itself. This is but the latest of an increasingly draconian set of efforts to keep the blue model ticking.

In many ways, the 20th-century model of employment was still marked by the feudal and patriarchal past: the employer-employee relationship at big corporations, operating under blue model assumptions, was and is a kind of halfway house between the relationship of the lord of the manor and the peasants in the fields, and a purely market transaction in which one person performs a designated service for another for a mutually agreed upon price.In the classic jobs-for-life corporate system, employees worked by the clock, not the task, were promoted and assigned on the basis of seniority, not performance, and the employer had a kind of patriarchal responsibility to her employees. Employees often signed morals clauses, regulating their personal behavior. In many cases, especially in isolated locations, but even in some “company towns”, employers operated “company stores” where employees could buy goods on credit (at, of course, interest).Labor unions came onto this scene, which, much like the feudal villages of old, generally worked better for the higher-ups than for the peasants, and tried to improve things for those they represented. They tried to increase cash wages, and they tried to transform the patron-client aspects of the employment system into something that benefitted workers more. So instead of company stores selling bad goods for high prices on credit, there would be credit unions offering loans at good terms with no restrictions on where employees could buy the products for which they were borrowing the money. This was the era of defined-benefit pension plans and employer-sponsored health plans.In part because, in an economy dominated by large bureaucratic corporations, it was relatively easy to improve worker compensation through legal mandates, labor law began to extend the patriarchal responsibilities of companies toward their employees, mandating rising levels of benefits. Unfortunately, the ever-rising costs imposed by this approach, however beneficial to workers, ran into the buzzsaw of economic transformation. The breakup of the stable oligopolies and monopolies that dominated the large American market without fear of competition, the globalization of manufacturing, the increased speed of technological change, the end of discrimination against women and minorities in the labor market—all these combined to make the costs of the full formal system increasingly uneconomic for all but the most profitable and secure firms.The response was the creation of a new economic sector in which the patrimonial relationship between worker and employer was attenuated. Temporary employment contractors, subcontractors, the rise of franchise operations, the rise of self employed providers of services once produced in house: these and other changes in the employment market increasingly simplified the employer-employee relationship: I do the job, you give me the money, we both go home.For people still thinking in and acting on the assumptions of 20th-century progressive, blue model thought, this was a horrible roll-back of all the social progress of the 1930s through the 1980s. As fast as noble, public-spirited champions of the workers and middle class imposed new obligations on the greedy and unscrupulous capitalists, the same capitalists slithered out of their obligations by exploiting legal loopholes to transform their stable, jobs-for-life employees into hire-and fire-at-will contractors and subcontractors.And, let’s be honest: one of the driving forces behind the transformation is that the old model imposed costs that were uneconomically high. So when companies move away from the old system, they save on labor and pension costs—and that can and does mean that workers can end up with less—in some cases, significantly less.President Obama and the progressives in his Administration believe that by fighting this trend—and the NLRB ruling is intended to do exactly that—that by forcing corporations back into the old patriarchal model of a politically-defined and regulated patron-client/employer-employee relationship, they are fighting for the economic interests of poor people and the lower middle class most directly, but also indirectly and to a lesser extent for the rights of all workers. Union activists believe the same thing, passionately and sincerely.What they don’t see is that the genie can’t be stuffed back in the bottle. All the king’s horses and all the king’s men can’t put blue Humpty Dumpty together again. Take the fast food industry, for example, an industry that virtually every economic and social policy of the contemporary progressive movement is trying to maim. From the $15-an-hour minimum wage in the industry demanded by New York to the fight against fast food on nutritional grounds by the Broccoli Police and the Nutrition Nannies, to this new NLRB ruling mandating that the employees of franchises be considered for certain regulatory purposes employees of the parent companies, the progressive movement is trying to do to McDonalds and related companies what Bill deBlasio and the taxi lobby want to do to Uber.The net effect of these changes will be to narrow the choices of food that poor people have, to raise the price of the food they have to buy, and to accelerate the automation of the restaurant industry, further reducing the already limited number of jobs open to people with few skills. Progressives will look on the consequences of this disaster and conclude that with urban unemployment higher and the cost of living for the poor rising, we obviously need more food stamps and rent subsidies—and so we must impose heavier taxes on the companies and industries that are still profitable in order to pay for these necessary benefits.The fundamental reason we have moved from the jobs-for-life, employer-as-paterfamilias model isn’t actually because evil corporations and capitalists declared an unprovoked war on the working class. The reason for the shift are the changes in the economy that the information revolution, and its unruly scion globalization, are driving. Yes, companies and investors are trying to maximize their profits. The way to fix this is not for progressives to take up William F. Buckley’s stance “athwart history, yelling Stop!” We need to be thinking about new forms of labor market regulation and policy that ensure that, as the old system of employment gradually fades away and a new one gradually emerges, the new system is one that offers the best possible mix of opportunity and security to ordinary people.The Obama Administration’s record on these issues is not all bad. Obamacare, flawed in other ways as it is, does at least begin to break the connection between a worker’s employment and a worker’s health care, and lowers some of the barriers that constituted discrimination against the self-employed and others buying insurance outside of employer-operated plans. That’s a very good thing, and whenever Obamacare is either reformed or replaced—as it surely will be over time—these accomplishments need to be conserved and even built upon. The EITC, championed by the Clinton Administration back in the days when forward looking rather than reactionary people still had a meaningful voice in Democratic party councils, was a visionary way to help make the labor market work flexibly and effectively while protecting low income workers.But unfortunately the reactionary progressives now seem firmly in the saddle as the Obama Administration lurches toward its close. Labor unions in particular are heavily invested in the old model—their essential aim in life is to be the mayor of the village negotiating on behalf of the peasants with the feudal lords. As such, they are determined to keep the remnants of feudalism still present in our economy alive. It is an impossible agenda because it is a reactionary agenda. In the end it hurts everyone, especially the poor, whom, allegedly, the blue agenda is intended to protect.Unfortunately, the structures and bureaucracies of the blue progressive era are determined to fight transformation every step of the way. They can’t stop the transformation of the economy and society now underway, but they can make it uglier and harder than it needs to be. That is what this NLRB ruling will do, unless either the courts or a change in the composition of the Board manage to undo the damage before it’s too late.

The Looming Bloodbath in Yemen

The capital of Yemen, Sana’a, has been in the Saudi-backed coalition’s sights ever since the rebel Houthis were driven out of the southern coastal city of Aden last month—and now the Saudis are poised to try to take it. Reuters reports:

Yemeni government forces intend to launch the battle for Sanaa within two months and steps are already under way to break the grip of Houthi fighters who controlled the capital for nearly a year, said the country’s exiled foreign minister. […]

“(The battle for Sanaa will begin) within eight weeks, God willing. It has really already begun in the resistance within Sanaa, which is mobilizing,” Yemeni Foreign Minister Reyad Yassin Abdulla told Reuters in an interview during a visit to Cairo.“Many things are happening which will lead to the retaking of Sanaa.”

But just as the Houthis were unable to hold Aden, the South Yemenis are likely to find taking and holding Sana’a—which is in the Houthis’ heartland—not much of a cakewalk. Yemen is in many ways two countries (from 1967-1990, this was officially the case). The Houthis are a mountain-dwelling people from the north, and belong to the Zaidi sect of Shi’a Islam. The population of South Yemen is not, and it’s not surprising the Houthis could not hold the south or its old capital, Aden. But for similar reasons, the Saudi-backed, southern-based coalition will likely have real trouble taking and holding the old capital of the north (and more recently, capital of the united country), Sana’a.

The Saudis can and probably will, however, bomb the city heavily and indiscriminately in supporting the effort, killing lots of innocent people and creating a Biblical-scale humanitarian catastrophe in the process. And given the touchy politics of the Iran deal, the temptation for the White House to go along with the Saudis on this one—or at least stay silent as the epic carnage unfolds—will probably be huge.

Japan Abides Abe

Japanese Prime Minister Shinzo Abe’s relentless campaign to remilitarize his country by undoing its constitutionally mandated pacifism has taken a toll on his political fortunes. When lengthy arguments on the floor of Japan’s parliament featured a string of respected legal scholars and politicians denouncing Abe’s “reinterpretation” of the constitution’s anti-war Article 9, it hurt him badly enough to raise the question of whether the party would try to force him from office. But now, the LDP has called a snap party election for September 20, and, with support from all of the party’s subfactions, an Abe victory looks like a fait accompli. Reuters reports:

[The LDP] on Friday set a date for a party leadership election that Prime Minister Shinzo Abe is bound to win, effectively assuring him of staying leader of the world’s third-largest economy.

All seven factions within the party supported Abe and there were no signs he would face a contender in the Sept. 20 vote, the Yomiuri Shimbun, Japan’s major daily, said.…His ratings bounced following a statement this month to mark the 70th anniversary of the end of World War Two, in which he expressed “utmost grief” for the suffering Japan caused.Toshihiro Nikai, a party heavyweight, told a news conference last week that the whole party was moving toward Abe’s re-election and that he had no doubt about his victory.

Abe is no stranger to the tempestuous nature of his country’s party politics. After all, the LDP has swept him into and then out of the country’s highest office before (this is not uncommon in parliamentary systems). In recent weeks, some noises from bigwigs inside the LDP indicated that he could soon be back in that kind of trouble. But the PM pressed through, proving himself once again to be a shrewd politician, in part because he seems to know that China, and to a lesser extent North Korea, are doing his most effective campaigning for him.

This news tells us something important about the likely future of Japanese power. Even as Abe’s militarism kick provokes gripes, his repeated narrow victories are testament to the fact that Japan as a society seems to have made up its mind to balance Beijing’s growing might. The Japanese people may hold their noses as they do it, but they eventually decide to do what it takes to keep dragging China back down into the regional competition Beijing so dearly wants to transcend in lieu of the global role it feels it deserves.Beijing, with all that territory and all those people, has been known to fall into the trap of discounting the little island nation off its coast. But for those of us trying to think through what China’s rise will mean for the future, we would do well not to make the same mistake. We would do well, in fact, to remember that in high-tech 21st-century warfare, where military might is no longer about how many 18 year olds you can give a machine gun to, Japan has the potential to be an out and out superpower—and one that puts paid to the supposed inevitability of Chinese geopolitical dominance.

Anchor Babies in Brazil?

Yep, the Chinese are having them. Folha de S. Paolo reports:

“He shui! He shui!” says nurse Patrícia Pinheiro to expectant mothers at the prenatal section of the Primary Care Unit (UBS, in its Portuguese abbreviation) at Sé, close to the Avenida do Estado, in the center of São Paulo.

With an increasing number of Chinese women seeking assistance at the health center, Pinheiro’s instruction to drink water was given not in Portuguese, but Chinese.According to two doctors, two nurses and an interpreter to whom Folha spoke, the immigrants hope to guarantee their stay in Brazil by having babies in the country. Parents of children born in Brazil cannot be deported, by law. […]Currently, there are more than 58,000 Chinese people legalized in Brazil, according to the Ministry of Justice. This figure does not take into account those in Brazil illegally or those in the process of obtaining their documents.

Stories like these underline the determination many Chinese have of securing a reliable escape hatch as the situation in China gets rickety. Taken alongside all the recent evidence of massive capital flows leaving China (even as Beijing takes extraordinary measures to stabilize the economy), it starts to look like lots of very successful and well-informed people in China think there is something serious to worry about.

Europe is Facing a “Great Wave” of Immigration

When illegal immigration to Europe first burst on to the American news scene, after the 2013 Lampedusa migrant boat sinking, it seemed to be primarily a humanitarian problem. Both in Europe and abroad, pundits focused on how to prevent tragedies like that one while at best secondarily making nods to integration and border security.

But today, while humanitarian horrors persist (over 70 immigrants were found dead in a truck in Austria yesterday, for instance), it has become clear that Europe is facing a policy crisis of Continental proportions. Writing in  USA Today , Glenn Reynolds (a.k.a. Instapundit) captures the scene:

From following the news, you’d think that immigration was strictly a U.S. problem, one brought to the fore by Donald Trump. But although Trump has certainly moved the debate to a new level here at home, other parts of the world are facing an immigration crisis that is, if anything, worse. And there are lessons in that.

The European Union, for example, is now beset with a flood of “migrants,” mostly from Africa and the Middle East. Some of them are fleeing war and civil strife; others are heading for a place with more economic opportunity — or, at least, with welfare benefits that dwarf what they could earn at home through hard work.[..][A]s Americans talk of a border fence, Bulgaria is building one, with razor wire and steel 12 feet high. And Slovakia is flat-out refusing to accept Muslim migrants, viewing them as dangerous and destabilizing. Migrants have massed at the Macedonian border and are creating tensions between Serbia and Hungary. Hungary is building a fence too. Norwegian politicians are suggesting that Norway should do something similar to Australia, which is sending unwelcome refugees to New Guinea or to prison.

The numbers back up the sense of crisis: Europe is facing levels of migration unprecedented since the Second World War. Germany now believes that 800,0000 migrants will come to the country by the end of the year, a fourfold increase over previous years. 107,500 migrants are reported to have come to Europe in July alone, the first time that over 100,000 have landed in one month. And in Britain, net migration has hit 330,000—another record.

Statistically, migration to Europe has now by many measures reached the level seen in America during our highest historical period of immigration, the so-called “Great Wave”, which lasted from 1880-1924. In 1903, for instance, in the middle of the Wave, approximately 800,000 immigrants entered an America that had a population of about 80 million residents—the same figures in both cases as for Germany this year. This year, the UK’s foreign-born population is expected to hit 8 million; out of a population of 64 million, that means that 12.5% of the country will be foreign-born—about where it hovered in the U.S. during the Great Wave.The Great Wave in the U.S. continued for over forty years; it probably won’t be allowed to in Europe (though as Ross Douthat points out, the demographic pressure from Africa will likely persist), so the analogy is by no means perfect. But it does illustrate the scale of the influx—and it also tells us something about the likely reaction.As I wrote last week, the Wave completely transformed America. New York is unimaginable without the Jewish and Italian influences it carried with it; ditto Chicago without the Polish and Eastern European immigrants. Demographically and culturally, the country shifted significantly.But as I also noted, this long period of essentially unrestrained immigration engendered a backlash so significant that, from 1924 onward, the U.S. completely shut down immigration for two generations—the influx slowed to a trickle, and not even the looming of the Holocaust, or the refugee crises that followed World War II, could persuade the public, whose opinion had hardened against immigration, to admit more than a token number of newcomers.At the start of the Wave, when the scale of the new immigration became clear to the American public—much as it is to Europeans now—the U.S. had several things going for it that present-day Europe does not. The country was underpopulated (the frontier would not officially be declared closed until the 1890 census) and the economy was booming and dynamic as the Industrial Revolution hit full stride in this country. The economy proved more than capable of absorbing the new immigrants and providing them with jobs. Perhaps most importantly, America had a history of large-scale immigration (think the Irish in the 1840s), and a legal structure and culture that favored the acceptance and assimilation of the newcomers.In the absence of these conditions, European popular patience is likely to be much shorter, and the reception for the refugees and migrants already there much less warm. In the U.S., there was at the beginning a sense of democratic acceptance of the scale of immigration; only when the public’s opinion shifted did we see increased radicalism (e.g. the rebirth of the Klan as an anti-immigrant phenomenon in the early 1900s) and then a broad-based, popular movement to shut the doors. In present-day Europe, immigrants are already arriving without legal sanction or democratic approval, and the backlash has already begun brewing in the form of the increased popularity of fringe parties. European leaders, if they want to avert a worse crisis, need to start taking some hard steps. First, they must get control of their borders.The Great Wave was both legal and popular; right now Europe’s is neither, and it shows.

Latvia and Greece Hop on the Anti-Science, Anti-GMO Bandwagon

Earlier this year the European Union struck what it believed to be compromise between Luddite anti-GMO campaigners and those that would like to see these crops, once safely vetted and approved, flourish. The deal, broadly speaking, went like this: the European Commission would test and approve specific genetically modified crops on a case-by-case basis to ensure their safety, but once crops were approved, member nations could opt out of importing them. In other words, Brussels gave EU countries a chance to say “no thanks, we don’t need to see the science, we’ll do without the crop.” Now, as Reuters reports, Latvia and Greece have the dubious distinction of being the first two nations officially to take advantage of that “opt-out” clause:

GM crops are widely-grown in the Americas and Asia, but Monsanto’s pest-resistant MON810 is the only variety grown in Europe, where opposition is fierce…In a statement on Thursday, the European Commission confirmed that so far only Latvia and Greece had asked for opt-outs from Monsanto’s request to continue to grow MON810.

In its formal response to Latvia, seen by Reuters, Monsanto says Latvia’s request “contradicts and undermines the scientific consensus on the safety of MON810″…”Nevertheless, we regret that some countries are deviating from a science-based approach to innovation in agriculture and have elected to prohibit the cultivation of a successful GM product on arbitrary political grounds,” the statement said.

These may have been the first, but they likely won’t be the last—Germany’s agricultural minister recently stated his country’s intention to opt-out; Scotland and France have similar anti-GMO stances. With these opt-outs, we’re getting a rare chance to see the opposition to GM crops laid bare. In effect, Latvia and Greece are telling Brussels that the scientifically rigorous approval process isn’t important. In some ways that’s refreshing to see, because that is exactly what anti-GMO greens around the world believe, though they campaign by preying on the fears of an unwitting public.

The fact is, these crops have been shown time and time again to be perfectly safe. With that box checked, we can go down the list: yes, they can produce higher yields; yes, they can be used with fewer pesticides (something you’d think greens would applaud); yes, they can even thrive in more extreme growing conditions, like the ones we’re told are heading our way due to climate change. This technology is a triumph of human ingenuity and its merits are being drowned out by the bias and fear mongering of the very group that ought to be championing it.These kinds of issues will only grow in importance in the coming years as we cope with our planet’s changing climate and researchers produce more breakthroughs like GM crops. The world desperately needs a better class of environmentalist than the dour, short-sighted, Malthusian one it’s got.

Pakistan Building Nukes at a Brisk Clip

Well what do you say about this bit of news, via the Washington Post? Interesting:

A new report by two American think tanks asserts that Pakistan may be building 20 nuclear warheads annually and could have the world’s third-largest nuclear stockpile within a decade.

The report by the Carnegie Endowment for International Peace and the Stimson Center concludes that Pakistan is rapidly expanding its nuclear capabilities because of fear of its archrival, India, also a nuclear power. The report, which will be released Thursday, says Pakistan is far outpacing India in the development of nuclear warheads. […]Pakistan could have at least 350 nuclear weapons within five to 10 years, the report concludes. Pakistan then would probably possess more nuclear weapons than any country except the United States and Russia, which each have thousands of the bombs.

Gosh, I wonder what Islamabad might want to do with such a vast surplus of nukes? Pakistan would certainly never sell the extras to an ally, like, say, Saudi Arabia—an ally that’s rumored to have bankrolled its nuclear program, and that’s been there with an open checkbook when times have been tough. Because, well, doing that might just put the Middle East on course to a multipolar nuclear arms race—the dreaded mousetrap proliferation scenario. And the Obama Administration has repeatedly assured us that one of its main goals in negotiating its deal with Iran has been to prevent just such a scenario.

No, it couldn’t be that. Never mind, carry on, nothing to see here.

Moscow’s Arctic Projects Left Out in the Cold

Russia has big plans for Siberia. There, the Bazhenov shale formation is estimated to contain more than a trillion barrels of oil and nearly two quadrillion cubic feet of natural gas. But sanctions put in place in the aftermath of Moscow’s aggression in Ukraine, along with plummeting oil prices that have forced oil companies to cut capital expenditures, have put the kibosh on development in the forbidding region. Sanctions have also made it difficult for these new Arctic projects to secure financing, and as the WSJ reports, that’s threatening to scupper the construction of a massive LNG exporting facility on the Yamal peninsula:

U.S. restrictions on OAO Novatek, the project’s Russian leader, are squeezing the massive Yamal LNG liquefied-natural-gas venture, a centerpiece of President Vladimir Putin’s plan for Russia to reduce its heavy dependence on natural-gas customers in Europe by increasing exports to Asia and, in turn, cementing Russian ties with China.

Barred by the sanctions from raising long-term dollar loans, Novatek and its foreign partners, Total SA of France and China National Petroleum Corp., are having to seek more money from Chinese lenders than they had intended, in addition to kicking in nearly $10 billion of their own, according to company executives. But they have, so far, failed to secure the $15 billion or so they need to complete the project.

Earlier this spring Russia turned to China for help, asking its eastern neighbor to finance projects the West was now leaving out in the cold. But now, with oil prices at six year lows and Beijing’s economic stability shaken by the recent stock market collapse, that assistance doesn’t look like it’s coming. Reuters reports:

A growing economic crisis in Russia and a growth slowdown in China that has rattled world markets mean about $113 billion worth of joint projects ranging from gas pipelines to power grids have been stalled or delayed…With a major crackdown on corruption also in progress in China, and Russia hit by sanctions, falling oil prices and a collapsing currency, some joint Russian-Chinese projects may be delayed indefinitely, industry sources and analysts say.

Rosneft, Russia’s state-owned oil company, announced earlier this month that it would be turning its focus “in the direction of increasing production at existing fields,” sending the signal that the development of new plays—so vital to Russia’s longer-term energy security—would be put on hold for the time being. That now seems to be the direction the rest of Russia’s oil and gas industry is moving. With the ruble crashing and oil revenues at dismal lows, Russia can’t seek help from the West, and now it seems that it can’t from the east, either.

As Beijing Lashes Out, the Anti-China Coalition Grows

China’s PLA Navy conducted live fire drills in the East China Sea Thursday, pouring further fuel on the geopolitical fire in Asia. According to a Reuters report citing state-run Chinese news agency Xinhua, “the training involved more than 100 ships, dozens of aircraft, information warfare units as well the firing of close to 100 missiles.” The drills, the third of their kind since June, won’t be taken well by Tokyo, whose territorial dispute with Beijing over the remote Senkaku/Diaoyu Islands is among the region’s most bitter conflict.

Though the sides never came anywhere near an ultimate agreement on the countervailing claims, in the last year China sharply deescalated in the East China Sea after long ramming Japanese ships and generally making life difficult for the country in the waters around the islands. Beijing had chosen instead to focus its expansionist efforts on the South China Sea, where counterclaimants like Vietnam, Brunei, and the Philippines aren’t quite so strong. But whatever informal rule was keeping Beijing quiet in the East China Sea may have lost its force, and there are increasing signs that China, roiled though it is by wobbly markets, will not be holding back in its fights with Japan.Capping off the East China Sea drills, for example, is Wednesday’s announcement of the first ever joint China-Russia amphibious exercises, which took place on Russia’s Pacific coast to the north of Japan. The two countries landed roughly 400 troops on a beachhead, in a mock assault that is sure both to make Taiwan even more nervous than usual about the prospect of a Chinese invasion and to rankle Tokyo, which is locked in yet another territorial dispute near where the drills took place, this one with Russia over the Kuril Islands.All in all, the week’s news doesn’t exactly paint a pretty picture of a harmonious future for Asia, and China’s foes as well as its friends are acting accordingly. One big sign of the times: Australia’s Defense Minister Kevin Andrews has announced a new military strategy that will see much closer military cooperation with the U.S. in Asia.Andrews, previewing an official white paper set to be released later in 2015, said that “…competing claims for territory and natural resources in the South China Sea will continue to be a source of tension in the region. Combined with growth in military capability, this backdrop therefore has the potential to destabilize the region and threaten Australia’s interests.” Closer military ties with the U.S., Andrews continued, will make sure that his country “can both defend Australia’s interests and work together with the United States in combined operations wherever our interests are engaged.” The white paper will reportedly call for spending billions more on advanced weaponry, much of it to be bought from the United States.This is a big deal, given longstanding Australian diplomatic norms. Australia has needed to balance between China and the U.S., and historically it has had a political aversion to hosting the American military. The anti-China coalition, increasingly drawing together, just got a powerful new member.

Russia’s Love Affair with Germany

Do you think Russians have only America on their minds? True, the U.S. is an ideal enemy for fanning the flames of collective hate and an ideal competitor for geopolitical games. But all the alleged grievances aside, has the U.S. ever played a significant role in Russia’s past or present? Not really—but another state has. Germany, of course, has exerted an enormous influence on Russia down through the centuries, although neither Russians nor Germans like to admit it. Germans have ruled Russia (they even institutionalized favoritism: “Bironovshchina” during the rule of Tzarina Anna [1730–40]); they constituted the most successful part of its military and commercial corps; they raised the Tsar’s children and colonized Russia’s barren lands. In the 19th century up to half of all governors and high-ranking army officers in Russia were of German descent. When Tsar Nicolas I asked the conqueror of the Caucasus, General Yermolov, how he wanted to be rewarded, the general reportedly replied, “Your Majesty, make me German!” At different points of Russian history, the “German factor” had a substantial effect on Russia’s trajectory. Had it not been for this factor, Russia might have moved in a whole different direction.

How Germans Influenced RussiansFrom its inception, Russia has desperately needed foreign professionals—to teach Russians about governance, manufacturing, military, mining, and other trades. The Dutch, Swedes, Brits, and French were among the foreigners who came to Russia. But Germans certainly dominated, becoming a privileged nationality in Russia.The ruling Romanov dynasty, which shared a lot of the German bloodline, became a branch of the Oldenburg dynasty under the name of Holstein-Gottorp-Romanov. Many of its members were born in Germany and spoke Russian with an accent. Germans, especially the Baltic ones, rapidly advanced through the ranks of the Russian society thanks to their talents, persistence, discipline, and loyalty to the throne (as of 1913, approximately 2,400,000 Germans lived in Russia).Following the 1917 revolution, Germany was the first country to establish diplomatic relations with the USSR, bringing Russia in from the cold of international isolation. In the course of ten years, from 1926 to 1936, the Soviet Union received more than four billion reichsmarks’ worth of industrial equipment and machinery from Germany. The USSR used raw materials, agricultural products, and gold to pay for the shipments (more than a billion reichsmarks’ worth of Soviet gold was brought to Germany during that period).In September 1939 Germany and the Soviet Union jointly began World War II by invading Poland—Germany on September 1, and the USSR on September 17 —as per the August 23, 1939, Molotov-Ribbentrop Pact and agreement between Soviet and German military commands. Russia is still trying to gloss over that historical episode. It’s been conclusively proven, however, that at that moment Stalin took Hitler’s side in his confrontation with the rest of the Western world.“We can’t allow Germany to lose” was the phrase Stalin uttered during his conversation with Ribbentrop on August 23, 1939. Moscow helped Hitler in his military campaigns, particularly in his confrontation with Great Britain. Hitler used Russia as a raw materials base (in 1940 alone, Moscow provided Germany with 600,000 tons of cotton, 1 million tons of grain, and 1 million tons of oil). Soviet economic aid helped thwart the British blockade of Germany.In light of these facts, one wonders whether Hitler would have dared start the war without the deal with Stalin. And if he had done so, would he have enjoyed such early successes?Stalin miscalculated. He thought that Hitler and the anti-Hitler coalition would exhaust one another, allowing him and his army to romp through a submissive Europe. He didn’t expect Germany to invade the USSR.So what happened to Russia’s Germans after the war started? As of 1939, there were 1,427,300 Germans in the Soviet Union. Despite his cooperation with Berlin, Stalin ordered that all German citizens working in the Soviet defense industry be arrested in 1937–38. Although Stalin was cutting deals with Hitler, he believed that the Germans living inside the Soviet Union had to be isolated. After Hitler’s invasion of the Soviet Union in July 1941, Soviet-citizen Germans were branded fifth columnists and deported to remote regions of the country. Thus these Germans were betrayed by the country that they considered their home.Looking back, one discovers not a single modernization breakthrough in the Russian Empire that would have been possible without the aid of Europeans—and the Germans indeed played the role of the “European factor.” Why Germans, and what attracted them to Russia? Why did they flock to this frigid semi-savage country? Was it geography, Germany’s internal problems, ambition, a sense of adventure, or perhaps romanticism?There is no question that Germans contributed a lot to the strengthening of the Russian empire-state. Krusenstern, Barclay de Tolly, Osterman, and other Germans have left an indelible mark on Russian history. Germans became part of the Russian elite and served their new homeland. They were often disliked. Russian nobility begrudged them their successes. It’s possible that the German dominance among the Russian ruling class triggered the first manifestations of Russian chauvinism. It’s ironic that Germans tried to improve the Russian state, whose traditions date back to the time of the Golden Horde. A strange symbiosis indeed!However, serving the Russian Empire, Germans and other foreigners failed to make Russia a European country. While they did make different aspects of Russian life more European, Germans didn’t change its despotic core; they just made its despotism more efficient. The scions of the nation that produced Max Weber, with his Legal-Rational Bureaucratic Model, successfully learned the law-averse inner workings of Russian absolutism.The Russian Empress Catherine the Great, formerly known as Sophie Friederike Auguste von Anhalt-Zerbst-Dornburg, adopted the Russian mentality and treated peasants as slaves, even as she corresponded with Voltaire. Thus the Russian autocratic system, which had always rejected Europe as a civilization, was able to get the Europeans to serve tyranny.Germans at the Turning Points of Russian HistoryThe “German factor” influenced Russia’s trajectory at several points in Russian history. Perhaps, the German influence was accidental, but sometimes so-called historical accidents can change historical trajectories. The Marx Infatuation . The Russian revolutionaries became infatuated with German philosophers. They went from Feuerbach to Marx, whose teachings helped legitimize Bolshevism. Who would Lenin have been without Marx? Would the Bolsheviks have come on the scene without Marxism? While we have no answers to these questions, it’s quite likely that their teaching would have been different. I think Marx would have been shocked to see how his doctrine was put to practice. The Sealed Railway Car . The 1917 revolution in Russia gave Berlin a chance to neutralize Russia on the Eastern front as the Germans began to lose World War I. Berlin had an ingenious idea to allow Lenin and his comrades to leave Germany and return to Russia (with help from Sweden). Churchill noted that Lenin was transported to Russia as a “plague bacillus.” Immediately upon his return, Lenin proclaimed his April Theses, urging the overthrow of the current government and Russia’s exit from the war. Germany provided the Bolsheviks with substantial funds for “revolutionary purposes”: prior to October 1917, the Germans had paid them 11 million German gold marks; in October 1917, the Bolsheviks received another 15 million marks. Lenin and the Bolsheviks indeed lived up to the Germans’ hopes by signing the Treaty of Brest-Litovsk, a humiliation for Russia. What if Lenin hadn’t returned to Russia in the spring of 1917 and had missed his chance to come to power? Perhaps a bourgeois revolution could have prevailed and Russia would be a different country now. The “Gas for Pipes” Deal. This “deal of the century”, concluded in 1970, sealed Russia’s fate for many decades to come. The USSR promised to ship three billion cubic meters of natural gas to West Germany annually. For its part, the German Mannesmann Corporation was obligated to pay for the fuel with 1.2 million tons of large-diameter pipes. The pipes were to be used for constructing a natural gas pipeline to the West. Ruhrgas was going to purchase the gas and provide it to its German clients through its own gas distribution network. The 1.2-billion Deutsche mark low-interest loan from Deutsche Bank guaranteed the financing of the deal.This deal laid a foundation for an even more important “Infrastructure and Money for Gas” deal, which ostensibly allowed the Soviet Union to become an energy power and to make Europe dependent on its energy shipments. But in reality the agreement made Russia into a raw-material appendage for Germany and, subsequently, Europe. Thus it prolonged the life of a dysfunctional model from which Russia still cannot escape today. Otto Wolff von Amerongen, who headed the German Committee on Eastern European Economic Relations from 1955 to 2000 and actively lobbied for the deal, said,

Some in the West German federal government weren’t quite excited by the prospects of expanded natural gas trade with the USSR. Ludwig Erhard, who perfectly understood the significance of the eastern market, told me, ‘The pipeline is great, but we are in a state of Cold War.’ He was convinced by a simple argument. I said that if we’re connected to each other through a pipeline, the political picture in the Soviet Union will change for the better. It will be a much greater gain than selling pipes or buying gas.

This belief became a staple of German policy on the USSR (and then on Russia). Amerongen was right as to the economic dividends Germany would reap from the deal, but he erred with respect to the change of the political picture.

Ostpolitik. It’s quite possible that both German politicians and the business community, which was in fact the engine behind this policy, sincerely believed that Russia could change as its relations with Germany strengthened. But what actually happened? Ostpolitik notwithstanding, the USSR simply resisted transformation. Instead, it just disappeared under pressure from another power: the United States. The renewal of Ostpolitik under the Partnership for Modernization label didn’t help Russia to modernize. In fact, it had the opposite effect. With its rentier class now integrated into the West, Russia moved in the other direction, convinced that Germany would always remain its loyal partner.Germany became the headquarters of the complicated system of lobbying structures that support the “Let’s Accommodate!” approach toward the Kremlin (no other country has a system like it!). Apart from the older generation of politicians, including some former Chancellors, Ospolitik has traditionally been supported by Germany’s Social Democrats (who, hopefully, have started to extricate themselves from it). In addition, the German Committee on Eastern European Economic Relations, the number one German lobbying group founded in 1952, continues to support making deals with the Kremlin. Besides these, there are the German-Russian Forum (founded in 1993) and the St. Petersburg Dialogue (founded in 2001 on Putin’s and former Chancellor Gerhard Schroeder’s initiative), both of which boast a glut of “Putin Verstehers.”“Not a single country in Europe managed to build anything that comes close to the cooperation with Moscow built by Bonn and Berlin for the past forty years,” said Egon Bahr in 2011. This is true. But what have been the results of this cooperation, Herr Bahr? How long would Russia’s anti-modern, resource-based system have lasted if not for Germany’s dealings with the Kremlin? Schroederization. The former German Chancellor went to work for Gazprom, the key institution of the Russian regime. He is now the chairman of the board for Nord Stream AG. For the Western political elite, his work has lent legitimacy to the act of serving a civilization that is alien to the West; we still underestimate its impact on the mood of the Western, mainly European, establishment. One could even argue that this move, by a former leader of the most powerful state in Europe, helped to render the concept of “reputation” irrelevant in the Western political community. Now anyone offered a job by an authoritarian regime can point to Chancellor Schroeder: “If he can do it, why can’t I?” Schroederization has also had an enormous effect, not incidentally, on the minds of Russia’s elite and people, who now believe that anything can be bought, for the right price.Perhaps, I’m exaggerating the role of some of these factors, but they have all played a part in shaping Russia’s historical development. As a matter of fact, some factors—the Gas Deal of the Century is one of them—played a decisive role.Germany in a New RoleThe German factor had benefited the traditional Russia until recently, but it looks like the love affair is over now, even if the Russians have yet to understand this. The Kremlin mistakenly believed that Germany would remain a political dwarf, ignore Russian revisionism and even revanchism, and continue to advocate accommodation. Russia’s internal problems would still force the Kremlin to turn to “Fortress Russia” on the international stage, but it might not have annexed Crimea and started a war with Ukraine had it known that Chancellor Angela Merkel would become a stalwart architect of European unity with respect to sanctions. The Kremlin put too much stake in its German lobbyists and “friends”, who were merely telling it what it wanted to hear. (I’m talking about you, Herren Platzeck, Teltschik, and de Meiziere [Die Linke parliament members], about you, Herr Rahr, and about the rest of the propagandists! The Kremlin hoped that Berlin’s anti-Americanism and its commitment to Ostpolitik would prevent the Germans from altering their traditional course—it had been such a great partnership through all these decades! Certainly the Kremlin had been sure that the Germans would stick to a trade-off that had benefitted Germany so handsomely. But Berlin instead decided to draw a red line. This, I think, was more than a disappointment for the Kremlin; it was a shock, first of all for Russia’s President Putin. The Russian side, both overconfident and poorly served by the experts, did not anticipate a change of mood in Germany. I can imagine what a cold shower for the Kremlin were the recent opinion poll numbers coming out of Germany: According to a 2015 Pew Research Center poll, 70 percent of Germans dislike Russia (against 27 percent who do), and 76 percent are unfavorable toward Putin (versus 23 percent favorable).True, even outsiders understand how difficult it is for Merkel to stick to the new Ostpolitik. It’s also clear that the Minsk-2 formula that Merkel and Hollande orchestrated leaves Ukraine in the Russian sphere of influence and guarantees neither its independence nor its territorial integrity. To admit failure would be painful for Berlin, no doubt. Nevertheless, all signs point to the fact that Germany has begun to consider a new approach to Putin’s Russia.Let me leave the Germans to sort out their feelings toward Russia on their own. The Kremlin and Putin have done everything they possibly could to cure the Germans of their idealism and romanticism with respect to Russia. The love affair is over (even if some on both sides want to pretend like it’s not). Trying to rekindle it won’t work for either side. It’s time for Russians to understand that Germany won’t prop the Russian personalized power system forever. In turn, Germans should finally realize the effect that their policies have had on Russia.